CSUN University News Clippings

New program caps monthly payments on student loans

(June 30, 2009)

By Sarah Rohrs

Repaying student college loans could be less painful through a new federal program that goes into effect Wednesday.

The new Income Based Repayment program allows federal student loan borrowers to come up with a payment plan that does not take them to the poor house, experts said.

The program allows student loan recipients with modest incomes to cap payments at 15 percent of their monthly income. Currently, no cap exists and some borrowers are paying more than one-third of their monthly incomes on loan payments.

That’s an “incredible burden,” said Rachel Racusen, communications director for Rep. George Miller, D-Martinez. “This is going to help millions of borrowers out there who are struggling with those payments,” she added.

Students already with loans and future borrowers can apply for repayment plan based on income and family size, Racusen said.

Student loan recipients need to contact their lenders directly starting Wednesday to enroll.

Borrowers can visit www.ed.gov for information about the program, and to use a calculator that will help them determine if they qualify and what their new payments might be under the program.

Under the program borrowers will not need to make student loan payments forever.

If a college loan is not paid off in 25 years, the remaining loan balance, including interest, will be forgiven. For borrowers in public service fields, debts will be forgiven after 10 years of consecutive service and loan payments.

The program stems from the 2007 Education Department’s College Cost Reduction and Access Act.

That program also attempts to make student loans more affordable by dropping interest rates from 6 percent to 5.6 percent, a move that could save a borrower thousands of dollars over the life of the loan.

Publication: Times-Herald